What should you prioritize when considering your growth strategy for a product-driven company?
Selecting a growth path based on fleeting trends or biases can significantly hinder a business's potential. A strategically chosen growth direction, especially in the tech industry, ensures the allocation of budget to projects that provide tangible value.
A misjudgment in this stage could result in wasted resources. Imagine investing heavily in perfecting a product without considering its user experience, only to find out that users abandon it shortly after onboarding. Your product might be the core of your strategy, but its success is intertwined with many other facets of your business.
Product-led Growth, also known as PLG, isn’t just about numbers. It dictates where you should spend your time, money, and effort to ensure an excellent user experience, build a loyal customer base, and enhance the overall value of your company.
That's why at Orogamis, we propose a unique approach to PLG. We believe in a holistic strategy, where the product doesn’t just drive numerical growth but also positively influences other business objectives. Dive in further or contact us to harness the full potential of a product-driven growth strategy.
In many ways, Product-Led Growth is much simpler than its Sales-Led counterpart. With the PLG model, the product is the key driver of acquisition, monetization, and retention, while sales and marketing are seldom part of the equation.
A great example is Asana. The web and mobile Work Management colossus is widely considered to be one of the most successful productivity applications, ever. In Asana’s case, the product’s conception was the brainchild of two genius-level ex-Facebook engineers who initially brought the MVP to market in the form of a free beta version in late 2011.
It’s important to remember that Asana's concept wasn’t born from luck or circumstance; rather, it was the ingenuity and creative thinking of gifted individuals who also happened to be excellent at execution.
Granting this, Asana wouldn’t start seeing mainstream adoption until after a $50 million round of Series C financing in 2016. Following that, another $125 million in Series D and E funding enabled Asana to truly hit its stride, and as of September 2022, the company is valued at a staggering $4.13 billion.
Another great example is Slack, a.k.a. “The Paragon of PLG” which went from zero to hero (and by hero, we mean $7 billion in valuation) in only 5 years, and achieved a daunting $23 billion valuation in their IPO (2019).
In their own words: “Many organizations adopt Slack initially as part of our self-service go-to-market approach (...) Organic growth is generated as users realize the benefits of Slack.” (Slack’s S-1 Filling)
The true challenge for PLG-oriented companies is to have a clear understanding of the benefits they provide to their audience and relentlessly improve them.
Slack never sold software. Their product is a streamlined way for teams to communicate without wasting time or focus on packed email inboxes. They start by wooing their users with a freemium product that makes them fall in love and invite all their colleagues. Then, they offer corporate solutions and a wide variety of integrations and automation as upsells… soon, the whole company is collaborating (and paying).
Of course, the cornerstone of a good PLG strategy is a heavenly user experience that turns users into advocates. That requires a lot of investment and talented UX teams.
To wrap up the PLG example section, we couldn’t forget Atlassian. It all started as a self-funded, PLG-only Australian company with a single product, Jira. Three years and a second product later (Confluence), Atlassian was profitable because of its innovative business model: they charged enterprise prices without a sales team (and that means no sales team paychecks).
Oh, and they kickstarted it all without venture capital. They bootstrapped the company for years, financing it with their credit cards. Not because they didn’t try to get funding, but because back in 2002, having a business with no sales team was considered too risky, to say the least, and investors didn't share their vision.
It wasn’t until 2010 that they got their first round of funding, raising $60 million. In 2015, they went public with an IPO valued at $4,37 billion, achieving $26,6 billion in 2019.
“We’ve had a lot of smart people who wouldn’t join the company or give us money or advise us because [our business] made no sense to them.” — Mike Cannon-Brookes, Atlassian co-founder
Atlassian basically invented the SaaS PLG game by offering a 30-day freemium trial and giving users the option to get a paid plan. You know the rest of the story: they use it, enjoy it, and start bringing in their friends, colleagues, and companies.
By perfecting their product and sprinkling some sales, they’ve amassed a huge customer base and pivoted to acquisition-led growth by acquiring software like Trello, Bitbucket, and others, thus becoming a growth engine powerhouse. Now, other companies create tech with Atlassian in mind as their exit.
Whether we consider Asana, Slack, Atlassian, or any of the other dozens of successful PLG companies, one thing is for certain: funding development is crucial to early-stage success. Getting off the ground with a PLG strategy is costly, but one could argue that the upfront costs pay handsome dividends as the product begins to win over consumers in the market.
Bear in mind, though, that PLG doesn’t mean sales-free. It means product will be in the driver’s seat, with sales and marketing riding along.
It’s not enough for a SaaS product to be self-evidently useful, and it takes much more than entry-level UX/UI to gain steam upon launch. To truly be successful, the most effective PLG strategies must include the following core UX features at a minimum:
With as much attention as it’s been getting, it’s tempting to think that Product-Led Growth is the be-all-end-all SaaS business model—that it has somehow become the ‘new normal’ prescription for assured success for tech startups.
The reality is that, just like we saw with the Sales-Led Growth model, Product-Led Growth strategies have their pros and cons.
Consider them in their entirety before making a judgment call about which strategy is best for your business.
Ask the head of a PLG-focused company to come up with a list of the advantages of the PLG model, and they will almost certainly list ‘scalability’ near the top. And, it’s for good reason: Product-Led Growth models are inherently great for scaling. This is especially true when the fundamental PLG features listed above are brought forward in the buyer’s journey.
Another benefit of the PLG model is that it appeals to the B2B buyer who simply does not want to deal with a salesperson. In case you’re wondering, this represents roughly three out of four B2B buyers—a sizable swath of your target market.
Yet another highly attractive feature of most PLG models is their ability to maintain higher retention rates. The PLG approach greases the skids for a fast and easy understanding of the value your product has, increasing the chances that user expectations will align with the capabilities of your product. In the long term, this dynamic makes for a better user fit, which has the uncanny tendency of keeping the user onboard for longer.
Because Product-Led Growth models rely so much on the product to do the selling, this will effectively inhibit your ability to influence the buyer’s journey in real time. With a Sales-Led approach, customer objections can be quickly identified and countered, or the deal can be sweetened as the prospect is guided closer to closed. This simply can’t happen in a PLG model.
Also, as we mentioned earlier, making the transition to large, enterprise clients is often unrealistic in a purely PLG-modeled business. These types of accounts have sophisticated needs that simply cannot be met without the involvement of experienced, technically savvy sales professionals. There is, after all, a reason why Oracle, SAP, and Salesforce.com have dedicated enterprise business development teams.
Another hallmark drawback of the PLG model that we’ve already touched on is the high initial cost. Building a feature-rich, easy-to-use, easy-to-buy SaaS product can take several months if not years just to get to the MVP stage. The coding and UX/UI resources needed to do this fetch an increasingly pricey premium, making the required upfront investment quite daunting indeed.
Upfront costs can also take the form of investments into fundamental product marketing—development of content, product documentation, user guides, white papers and success stories, and more.
It's evident that while PLG offers numerous advantages in scalability, user retention, and catering to the modern B2B buyer's preferences.
BUT - it's not a silver bullet. Like every growth strategy, it comes with its challenges: from high upfront costs to limitations in influencing the buyer's journey in real-time.
With the right guidance, meticulous planning, and a deep understanding of the market, PLG can be the linchpin for SaaS businesses aiming for success in today's competitive landscape. The journey is fraught with challenges, but the potential rewards in terms of scalability, customer loyalty, and market penetration are ginormous.
Have you decided to invest in PLG after weighing its pros and cons, but still feel unsure how to navigate its complexities and nuances? At Orogamis, we specialize in crafting bespoke PLG strategies that align with your business goals and market dynamics. We welcome you to dive deeper and ask questions as our goal here is to collaboratively chart a course for your SaaS success story.
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